Feb 21, 2023

Top digital retail industry trends

Is it hard to keep up with the latest trends in retail and CPG? Let us pick out five that are worth knowing about.

Top digital retail industry trends

“When it comes to how the next 12 months will play out, uncertainty is the name of the game.”

This is what Deloitte had to say in early 2020 before the pandemic had taken hold. The Big Four consulting firm was trying to predict the major trends in retail for the year ahead, but even they probably didn’t realize how prophetic their words would turn out to be.

The year 2020 upended many industries, and retail was no exception. We were already seeing big changes in the way people shop, yet few could have predicted how quickly the landscape would transform in such a short amount of time.

So, what does 2021 have in store for the retail industry? Before we dust off our crystal ball, we’ll first need to dig out the time machine. We’ll first need to quickly review some recent trends that have helped set the scene for what’s happening today – and what’s to come.

A quick look back at the retail industry in 2020

It’s no secret that eCommerce has been gaining retail market share over the last 10 years. But the nature of last year meant, in most countries at least, that shopping online was no longer just a convenience, it was pretty much the only option.

Many people who had never bought anything online before did so for the first time in 2020. Older consumers in particular changed their habits. Mintel research revealed 43% of over-65s had begun shopping online more since the pandemic started.

Unsurprisingly, the shift towards online shopping accelerated retailers’ digitization plans. IBM’s 2020 US Retail Index Report says the pandemic has fast-tracked digitization by approximately five years. Brands without a strong online presence have struggled in a world where lockdowns shut down many high streets and actively encouraged people to stay indoors.

So far, so expected. But this has set an interesting scene for 2021. With greater eCommerce competition for virtually all retailers, where does competitive edge come from?

As we’ll see, shoppers want more than just the convenience and choice that eCommerce brings. At a brick-and-mortar store, customers can browse products, chat with assistants and fully engage with the brand.

Recreating that in-store feel online is difficult. No matter how great a retailer’s tech, it often lacks the human touch that makes the best customer experiences so memorable. That could be set to change in 2021.

Going (more) digital: Top retail trends for 2021

Digitization was crucial to many retailers’ strategies for coping with the pandemic last year. Let’s now delve a little deeper into the specific consumer, strategy and tech trends we expect to see in 2021.

1. Solving big customer experience challenges

Even before the pandemic, customer experience was already at the top of the agenda for many retailers. In 2018, 65% of consumers told PwC that a positive customer experience has more influence on them than advertising. Nearly three-quarters (73%) said customer experience plays an important role in their buying decisions.

There is also a price premium; people are willing to pay 16% more for products and services on average if retailers provide a stellar experience.

Retailers have reacted accordingly, with Forrester research showing that 70% hiked up their customer experience budgets for 2020. And yet, many are still struggling to provide personalized options (51%) and real-time interactions (46%).

Businesses are spending more, but still falling short on the customer experiences that people want and expect.

As we head deeper into 2021, these problems will only become more acute. Most people are now much more akin with online shopping, and will likely continue to use digital means from now on. Where this leaves people who have traditionally preferred the in-store experience, so they’ll have high expectations of brands in the online realm, is certainly something to think about.

Strategically bridging the CX gap between online and in-store experiences is likely to be a focus for many a retailer this year. They’ll be thinking how they can use technology to offer more of what customers love about in-store interactions digitally. Which brings us to our second trend.

2. Conversational AI providing the human touch in retail

Three-quarters of people want more human interaction during the retail experience, according to PwC. This may seem surprising, given the trend towards more people shopping online. But if you’ve tried to navigate most eCommerce websites, you can instantly see what’s missing from the online shopping experience.

It also puts retailers in a tricky position. How can companies evolve digitally while still providing the human touch?

Events last year only exacerbated the issue. Lockdowns and social distancing have meant fewer people have been able to spend time with loved ones. People are craving interaction.

Conversational AI could help retailers bridge this digital divide. Virtual assistants and chatbots can have more human-like conversations with customers, and brands are increasingly using them on their websites and social channels.

However, we could see more retailers ramping up AI investment in 2021, deploying technologies that help provide a more human touch, both directly and indirectly.

For example, using AI to facilitate order fulfilment and other back end or administrative processes will free up staff that can then focus on interacting with customers. More directly, we could see chatbots and virtual assistants taken to the next level in the form of digital humans.

Our recent polling shows that 42% of brands are looking to add a more human touch to their chatbot as a matter of priority. It suggests that these brands know how important a person-to-person, face-to-face interaction is, and are wishing to bring it into the digital world.

To hear more about conversational AI in retail from one of the most innovative minds out there, check out this interview we had with Jabari Simmons, VP CX Innovation at Verizon, at Digital Human Day 2020.

3. XR for better immersion and engagement

This year could be the year that virtual reality (VR), augmented reality (AR) and mixed reality (MR) really come into their own. These XR solutions – short for extended reality – have largely been an experimental extra for big retailers in recent years, but they could quickly become essential for smaller businesses as shoppers move increasingly online.

XR has a range of applications, with the make-up, fashion and furniture industries being the early innovators. Try before you buy, virtual wardrobes and digital store fronts are already helping some brands improve engagement with customers, heightening the ‘at-home’ shopping experience.

And customers are very much on-board, with 51% saying they’d be willing to use XR technologies to assess products and services, according to a Nielsen survey. With hygiene likely to remain a major concern in 2021, retailers may be expected to offer XR and similar services to reduce the risks of multiple customers handling the same goods.

While it will most likely take time for adoption of the necessary hardware to take off at a consumer level, we may begin to hear more about XR before the year is out.

4. Contactless – and branded – shopping experiences

From extended reality to something a little more in our wheelhouse. The world is now more aware of the surfaces we touch. Think of the self-service kiosks we use every day – in supermarkets, stores, cinemas and even sidewalks. The stage has been set for a more contactless, voice-activated future.

In truth, this trend has been growing for a few years. In three years’ time, there will be more voice-activated devices in the world than people, as consumer acceptance of voice assistants grows rapidly. By next year shopping through voice assistants will reach at least $40 billion in transactions worldwide.

This opens new branding opportunities, too. We’ve already seen plenty of retailers considering how their brand sounds to their consumers. It’s no doubt on the mind of every social media specialist, brand manager and ad agency you’ve ever worked with.

But the movement to voice-activated devices as a shopping medium will likely mean better, more emotive digital brand experiences.

After all, you can convey more emotion, meaning, empathy, warmth and friendliness through voice than just text alone. And they’re all things that in-store shopping experiences excel at far beyond eCommerce channels.

When you combine that with the visual nature of digital humans, a highly branded and contactless shopping medium seems not just in-demand but essential for 2021.

5. Omnichannel shopping becomes a real priority

Many people didn’t just try online shopping for the first time in 2020; they also tried shopping across multiple channels for the first time. In April 2020 alone, buy online, pay in-store (BOPIS) purchases grew 34% over a six-week period.

Shoppers like it too. In fact, 59% said they’d continue to use these services over the long term. A whopping 93% of US customers also intended to pick up online purchases in store over the holiday period because it can be quicker and cheaper than deliveries.

This is just one example of omnichannel customer experiences, but it highlights an important point. People have turned to a mixture of channels for their retail needs, and it looks like they’re enjoying the flexibility and convenience these services offer.

What retailers will have to consider is whether they offer a consistent (and consistently excellent) experience across all these touchpoints.

This goes right through the customer journey. Adverts tend to be very engaging and even emotionally connected to the customers’ needs, feelings and values. But that experience often doesn’t carry through to when that customer reaches the brand’s website. And should a customer go to pick up their item in store, this is often the first human contact they’ve had in the journey – and potentially the last.

The challenge is clear: retailers without true omnichannel experiences in 2021 could risk losing important market share to competitors. But the opportunity of nailing exceptional omnichannel experiences – ones that offer the same emotionally engaging experience at every touchpoint? Customers are willing to switch to get it!

Shopping becomes personal again in 2021

There have been some exceptionally challenging months for the retail industry, but many brands have pivoted well to cope with the unique challenges of the pandemic.

Many of the trends the industry already saw creeping over the horizon have sped into the foreground. From conversational AI adoption to strategic focuses on omnichannel delivery and more, retail trends as a whole are more accelerating than changing.

One thing that will never change is that consumers love personal, human experiences. After a rough and largely isolated 2020, that’s probably more true today than it ever was – putting brands that offer a little humanity in a great position for the future.